Abstract
This paper examines the relation between executive compensation and value creation in merger waves. The sensitivity of CEO wealth to firm risk increases the likelihood of out‐of‐wave merger transactions but has no influence on in‐wave merger frequency. CEOs with compensation linked to firm risk have better out‐of‐wave merger performance in comparison to in‐wave mergers. We also present evidence that cross‐sectional acquirer return dispersion is greater for in‐wave acquisitions. Our results suggest that the underperformance of acquiring firms during merger waves can be attributed in part to ineffective compensation incentives, and appropriate managerial incentives can create value, particularly in non‐wave periods.
| Original language | English |
|---|---|
| Pages (from-to) | 132-162 |
| Number of pages | 31 |
| Journal | Journal of Business Finance and Accounting |
| Volume | 47 |
| Issue number | 1-2 |
| Early online date | 11 Jan 2020 |
| DOIs | |
| Publication status | Published - 8 Feb 2020 |
Keywords
- deal performance
- delta
- vega
- incentive compensation
- merger waves
- G31
- G34
- M12
ASJC Scopus subject areas
- Business, Management and Accounting (miscellaneous)
- Accounting
- Finance
